UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-QSB/A

                [X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
                   OF THE SECURITIES EXCHANGE ACT OF 1934 For
                    the quarterly period ended June 30, 2005

           [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

               For the transition period from ________ to ________

                        Commission File Number 000-51006

                              HARBIN ELECTRIC, INC.

                 (Name of small business issuer in its charter)


                Nevada                                  98-0403396
 (State or other jurisdiction of               (IRS Employer Identification No.)
           incorporation)

                   No. 9 Ha Ping Xi Lu, Ha Ping Lu Ji Zhong Qu
           Harbin Kai Fa Qu, Harbin, People's Republic of China 150060
                    (Address of principal executive offices)

                                 86-451-86116757
                           (Issuer's telephone number)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Securities  Exchange Act of 1934,  during the past 12 months
(or for such  shorter  period  that the  registrant  was  required  to file such
reports),  and (2) has been subject to such filing  requirements for the past 90
days. Yes [X] No [ ]

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                   PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the  registrant  filed all  documents  and reports  required to be
filed by Section 12, 13 or 15(d) of the  Securities  Exchange  Act of 1934 after
the distribution of securities under a plan confirmed by a court. Yes [ ] No [ ]


                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity,  as of June 30,  2005:  15,000,451  shares  of common  stock,  par value
$0.00001 per share

<PAGE>
<TABLE>
<CAPTION>
                                Explanatory Note


This  Amendment  is  filed to  amend  and  restate  the  Company's  Consolidated
Statement  of Cash Flows for the period  ended June 30, 2005 from the  Company's
prior filing on Form 10-QSB (the "Original Filing").  Through an internal review
process, the Company discovered that there were certain inaccuracies as reported
in the  Consolidated  Statement  of Cash Flows for the six months ended June 30,
2005.

The corrections in this restatement do not impact the Consolidated  Statement of
Operations or Consolidated  Balance Sheet for the reporting period,  nor do they
impact the reported Net Income for the period or year to date.  The  corrections
in these  restatements do not have any carry-forward or carry-back impact on the
Company's  consolidated financial statements for other periods. In addition, the
Original Filing has been amended to contain currently dated  certifications from
the Company's Chief Executive Officer and Chief Financial  Officer,  as required
by Sections 302 and 906 of the  Sarbanes-Oxley  Act (See Exhibits 31.1, 31.2 and
32.1.).


                                                   Table of Contents

                                                                                                            Page No.
<S>                                                                                                            <C>
Part I.  Financial Information

Item 1        Financial Statements (Unaudited):

Consolidated Statements of Operations

              For the Three Months Ended June 30, 2005 and 2004...............................................  1

              For the Six Months Ended June 30 2005 and 2004..................................................  2

Consolidated Balance Sheet
              As of June 30, 2005.............................................................................  3

Consolidated Cash Flow Statements
              For the Three Months Ended June 30, 2005 and 2004...............................................  4

              Notes to the Consolidated Financial Statements..................................................  5

Item 2        Management's Discussion and Analysis or Plan of Operation....................................... 16

Item 3        Controls and Procedures......................................................................... 21

Part II.  Other Information

Item 6        Exhibits........................................................................................ 21

Signatures.................................................................................................... 22

Index to Exhibits............................................................................................. 23

</TABLE>

<PAGE>

                          PART I. FINANCIAL INFORMATION

Item I.  Financial Statements

                      HARBIN ELECTRIC, INC. & SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)
<TABLE>
<CAPTION>


                                                                                      FOR THE THREE MONTH
                                                                                          PERIODS ENDED

                                                                                June 30, 2005         June 30, 2004
                                                                                ---------------       --------------
<S>                                                                                  <C>                   <C>
Net revenue                                                                     $    5,274,442        $        0.00

Cost of revenue                                                                 $    2,520,020        $        0.00
                                                                                ---------------       --------------


Gross profit                                                                    $    2,754,422        $        0.00

Operating expenses
     Selling expenses                                                           $       17,745
     General and administrative expenses                                        $      142,301        $      37,955
                                                                                ---------------       --------------

        Total operating expenses                                                $      160,046        $      37,955
                                                                                ---------------       --------------

Income (loss) from operations                                                   $    2,594,376        $     (37,955)

Non-operating Income
     Interest income                                                            $       13,824
                                                                                ---------------       --------------

Net income (loss)                                                               $    2,608,200        $     (37,955)

Other comprehensive loss - unrealized loss on marketable securities             $     (159,645)
                                                                                ---------------       --------------

Comprehensive Income (loss)                                                     $    2,448,555        $     (37,955)
                                                                                ===============       ==============

Basic weighted average shares outstanding                                           15,000,450            8,000,000
                                                                                ===============       ==============

Basic net earnings per share                                                    $         0.17        $       (0.00)
                                                                                ===============       ==============

Diluted weighted average shares outstanding                                         15,125,588            8,000,000
                                                                                ===============       ==============
Diluted net earnings per share                                                  $         0.17        $       (0.00)
                                                                                ===============       ==============
</TABLE>

         The accompanying notes are an integral part of these unaudited
                       consolidated financial statements.

                                       1

<PAGE>

                      HARBIN ELECTRIC, INC. & SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                        FOR THE SIX MONTH
                                                                                          PERIODS ENDED

                                                                                 June 30, 2005        June 30, 2004
                                                                                ---------------       --------------
<S>                                                                                  <C>                   <C>
Net revenue                                                                     $    9,402,739        $        0.00

Cost of revenue                                                                 $    4,598,080        $        0.00
                                                                                ---------------       --------------
Gross profit                                                                    $    4,804,659        $        0.00

Operating expenses
     Selling expenses                                                           $      124,333
     General and administrative expenses                                        $      394,001        $      41,312
                                                                                ---------------       --------------
        Total operating expenses                                                $      518,334        $      41,312
                                                                                ---------------       --------------

Income (loss) from operations                                                   $    4,286,325        $     (41,312)
Non-operating Income
     Interest income                                                            $       14,118
                                                                                ---------------       --------------

Net income (loss)                                                               $    4,300,443        $     (41,312)

Other comprehensive loss - unrealized loss on marketable securities             $     (145,645)
                                                                                ---------------       --------------
Comprehensive Income (loss)                                                     $    4,154,798        $     (41,312)
                                                                                ===============       ==============
Basic weighted average shares outstanding                                           15,000,450            8,000,000
                                                                                ===============       ==============
Basic net earnings per share                                                    $         0.29        $       (0.01)
                                                                                ===============       ==============
Diluted weighted average shares outstanding                                         15,125,588            8,000,000
                                                                                ===============       ==============
Diluted net earnings per share                                                  $         0.28        $       (0.01)
                                                                                ===============       ==============
</TABLE>

         The accompanying notes are an integral part of these unaudited
                       consolidated financial statements.

                                       2

<PAGE>

                      HARBIN ELECTRIC, INC. & SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
               (UNAUDITED) For Cash flow calculation purposes only
<TABLE>
<CAPTION>


                                                                                 AS OF JUNE 30,
                                                                                      2005
                                                                                ---------------
<S>                                                                                    <C>
            ASSETS

            CURRENT ASSETS:
                 Cash & cash equivalents                                        $    3,754,798
                 Accounts receivable, net                                            1,926,321
                 Inventory                                                             267,893
                 Advances to suppliers                                               1,239,039
                 Marketable securities                                                 362,600
                                                                                ---------------

                    Total current assets                                             7,550,650

            PROPERTY AND EQUIPMENT, net                                              9,076,333

            INTANGIBLE ASSETS, net                                                     579,195
                                                                                ---------------


            TOTAL ASSETS                                                        $   17,206,179
                                                                                ===============


            LIABILITIES AND STOCKHOLDERS' EQUITY

            CURRENT LIABILITIES:
                 Accounts payable                                               $      377,166
                 Payment in advance                                                     37,171
                 Accrued expenses                                                      126,390
                 Due to related parties                                                 87,360
                                                                                ---------------

                     Total liabilities                                                 628,087

            Minority Interest                                                        1,218,000

            STOCKHOLDERS' EQUITY
                 Common stock, .00001 par value; authorized shares 100,000,000;
                    issued and outstanding 15,000,450 shares                               150
                 Additional paid in capital                                          6,497,692
                 Shares to be issued, 786,000 shares of common stock                 2,400,000
                 Statutory reserves                                                    991,766
                 Accumulated other comprehensive loss                                 (145,645)
                 Retained earnings                                                   5,616,129
                                                                                ---------------

                     Total stockholders' equity                                     15,360,092
                                                                                ---------------


            TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                          $   17,206,179
                                                                                ===============
</TABLE>

         The accompanying notes are an integral part of these unaudited
                       consolidated financial statements.

                                       3

<PAGE>


                      HARBIN ELECTRIC, INC. & SUBSIDIARIES
                        CONSOLIDATED CASH FLOW STATEMENTS
                                   (UNAUDITED)
<TABLE>
<CAPTION>


                                                                                  FOR THE SIX MONTH PERIODS ENDED
                                                                                 JUNE 30, 2005         JUNE 30, 2004
                                                                                ---------------      ---------------

<S>                                                                                   <C>                    <C>
          CASH FLOWS FROM OPERATING ACTIVITIES:
                      Net income (loss)                                         $    4,300,443       $      (41,312)
                      Adjustments to reconcile net income (loss) to net cash
                      provided by (used in) operating activities:
                                   Depreciation                                        211,290               13,963
          Minority Interest
                                   (Increase) decrease in current assets:
                                               Accounts receivable                  (1,900,326)                   -
                                               Inventory                                 1,411              (72,600)
                                               Advances to suppliers                (1,183,090)            (550,000)
                                               Other receivable                              -           (4,671,805)
                                               Other assets                                  -              (20,000)
                                   Increase in current liabilities:
                                               Accounts payable                        414,336               20,400
                                               Other payable                                 -            1,309,014
                                               Accrued expenses                       (116,650)              (1,835)
                                                                                ---------------      ---------------

                      Net cash provided by (used in) operating activities            1,727,414           (4,014,175)
                                                                                ---------------      ---------------


          CASH FLOWS FROM INVESTING ACTIVITIES
                                  Acquisition of intangible assets                    (266,200)                   -
                                  Acquisition on property & equipment                 (210,888)            (155,666)
                                                                                ---------------      ---------------

                      Net cash used in investing activities                           (477,088)            (155,666)
                                                                                ---------------      ---------------


          CASH FLOWS FROM FINANCING ACTIVITIES:
                     Due to related party                                               87,360                    -
                     Advances to related party                                         206,309              395,360
                     Increase in paid in capital                                             -            5,274,000
                                                                                ---------------      ---------------

                      Net cash provided by financing activities                        293,669            5,669,360
                                                                                ---------------      ---------------


          NET INCREASE IN CASH & CASH EQUIVALENTS                                    1,543,995            1,499,519

          CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD                               2,210,803              309,260
                                                                                ---------------      ---------------

          CASH & CASH EQUIVALENTS, END OF PERIOD                                $    3,754,798       $    1,808,779
                                                                                ===============      ===============

</TABLE>

         The accompanying notes are an integral part of these unaudited
                       consolidated financial statements.

                                       4
<PAGE>

                     HARBIN ELECTRIC, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005
                                   (Unaudited)


1.  ORGANIZATION AND DESCRIPTION OF BUSINESS

Harbin  Tech Full  Electric  Co.,  Ltd.  ("HTFE")  was  founded in the  People's
Republic of China on April 10, 2003. HTFE was incorporated and formerly known as
Harbin Tech Full Technology  Development Co., Ltd. ("HTFTD").  On July 12, 2004,
the Board of  Directors of HTFTD  approved  changing the name of HTFTD to Harbin
Tech Full Electric Co., Ltd. HTFE is located in the Nangang District,  Harbin of
Heilongjiang  Province.  The  business  license  of HTFE was  issued  by  Harbin
Business  and  Industrial  Management  Bureau on April 10, 2003.  The  operating
period of the business license is from August 17, 2004 to December 31, 2008.

HTFE is engaged in the  business  of  manufacturing  and  marketing  of advanced
linear motor systems ("LIMs").  LIMs are a highly efficient form of rotary motor
which operate based upon opposing electrical  charges,  and are commonly used in
high speed trains and conveyor belts.  HTFE has domestic  patents for commercial
applications  of LIMs.  HTFE's LIMs  represent a  significant  improvement  over
traditional  electric motors based on design,  energy output,  energy efficiency
and  precision   movement.   HTFE's  products  have   applications  in  numerous
industries, including the oil, postal, transportation,  logistical and packaging
industries.

Tech Full International,  Inc. ("TFI") was a Delaware corporation,  incorporated
on August 24, 2004. TFI was a non-operative holding company of HTFE.

On August 31, 2004, TFI entered into an agreement with all the  shareholders  of
HTFE to exchange  all of the  outstanding  stock of TFI for all the  outstanding
stock of HTFE. After the consummation of the agreement,  the former shareholders
of HTFE owned 1,500 shares of common  stock of TFI,  which  represented  100% of
TFI's issued and outstanding  shares. For U.S. Federal income tax purposes,  the
transaction is intended to be qualified as a tax-free  transaction under section
351 of the Internal Revenue Code of 1986, as amended.

The  exchange  of  shares  between  TFI and the  shareholders  of HTFE  has been
accounted for as a reverse  acquisition  under the purchase method of accounting
since the  shareholders  of HTFE obtained  control of the  consolidated  entity.
Accordingly,  the  combination  of the two  companies  has  been  recorded  as a
recapitalization  of HTFE, with HTFE being treated as the continuing entity. The
historical  financial  statements  presented are those of HTFE.  The  continuing
company  has  retained  December  31 as  its  fiscal  year  end.  The  financial
statements of the legal acquirer are not  significant;  therefore,  no pro forma
financial information is submitted.

On January 24, 2005, the TFI consummated a merger agreement with Torch Executive
Services  Ltd.  ("Torch"),  a  Nevada  corporation,  under  which  Torch  issued
8,000,000  shares of Torch  common stock to the  shareholders  of TFI, and under
which TFI merged into Torch Subsidiary, Inc., a Delaware corporation ("TSI") and
an acquisition  subsidiary of Torch,  with TSI being the surviving  entity. As a
part  of  the  merger,  Torch  cancelled  5,000,000  shares  of its  issued  and
outstanding  stock owned by its former  president.  The  exchange of shares with
Torch has been accounted for as a reverse  acquisition under the purchase method

                                       5
<PAGE>
                     HARBIN ELECTRIC, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005
                                   (Unaudited)


of  accounting  since  the  shareholders  of  TFI  obtained  control  of  Torch.
Accordingly,   the  merger  of  the  two   companies  has  been  recorded  as  a
recapitalization  of TFI, with TFI being treated as the continuing  entity.  The
financial  statements of legal acquiree are not significant;  therefore,  no pro
forma financial information is submitted.

Torch was  incorporated  in the State of  Nevada  on July 9,  2003.  Torch was a
development  stage  company  in the  business  of  providing  luxury  travel and
concierge  services on a  personalized  one-to-one  basis as well as through the
internet.

As a part of the  merger,  Torch was  renamed  to  Harbin  Electric,  Inc.  (the
"Company") and the Company declared a stock dividend of 1.5 shares on each share
of its common stock outstanding for all shareholders on record as of January 26,
2005.

In connection with the  transactions  described  above,  the Company changed its
fiscal year end to December 31.

Joint Venture with Baldor Electric Company

On January 12, 2005, Harbin Tech Full Electric Co., Ltd. ("HTFE") entered into a
certain Share Transfer  Agreement (the "Share Transfer  Agreement")  with Harbin
Tech Full Industry Co., Ltd. ("HTFI"), pursuant to which HTFI agreed to transfer
all of its  interests  in a joint  venture  (the  "Joint  Venture")  with Baldor
Electric Company  ("Baldor"),  a U.S. company which trades on the New York Stock
Exchange,  to HTFE.  In exchange for the transfer of the  interests in the Joint
Venture,  HTFE  agreed to cause its  publicly  traded  holding  company to issue
1,000,000  shares of Harbin  Electric,  Inc.'s common stock to HTFI as a payment
for the  transfer of the Joint  Venture  interests.  On February 16, the Company
agreed to issue such shares.

Pursuant to a certain Joint Venture Agreement (the "Joint Venture Agreement") by
and  between  HTFI and  Baldor,  HTFI has a 65%  equity  ownership  in the Joint
Venture and Baldor has the  remaining  35%.  Also  pursuant to the Joint Venture
Agreement,  HTFI will receive 55% of the profits from the Joint Venture with the
remainder of the profits going to Baldor. The purpose of the Joint Venture is to
manufacture  and market  electric  machineries  and related  equipment in China,
utilizing  Baldor's  technology.  Tianfu Yang, the Chief  Executive  Officer and
Chairman of the  Company and the  Company's  majority  shareholder,  is also the
principal owner of HTFI.

Based upon the valuation of the Joint Venture by an independent  appraiser,  the
Company  determined  that the number of shares  issued under the Share  Transfer
Agreement should have been 786,885.  In light of such valuation,  HTFI, HTFE and
the  Company  agreed to amend and restate the Share  Transfer  Agreement  and to
adjust the number of shares the Company  would issue to HTFI.  On May 12,  2005,
the Company entered into a certain Amended and Restated  Agreement with HTFI and
HTFE, to amend the Share Transfer  Agreement  dated as of January 12, 2005. Upon
completion of the accounting for inclusion of the Joint Venture,  HTFI, HTFE and

                                       6
<PAGE>
                     HARBIN ELECTRIC, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005
                                   (Unaudited)


the Company  agreed that the Company  would issue  786,885  shares of its common
stock, par value $0.00001 to HTFI.

The Joint  Venture is  inoperative  to date and has not  generated  any  revenue
through June 30, 2005.

2. BASIS OF PRESENTATION

The  accompanying  unaudited  financial  statements  of the  Company  have  been
prepared in accordance with generally accepted accounting principles for interim
financial information.  Accordingly,  they do not include all of the information
required by generally  accepted  accounting  principles  for complete  financial
statements. In the opinion of management,  all adjustments (consisting of normal
recurring  adjustments)  considered  necessary for a fair presentation have been
included.  Operating  results  for  the  interim  periods  are  not  necessarily
indicative of the results for any future period. These statements should be read
in conjunction with the Company's audited financial statements and notes thereto
for the fiscal year ended December 31, 2004.

Accounts Receivable

The  Company's  policy is to maintain  reserves for  potential  credit losses on
accounts  receivable.  Management reviews the composition of accounts receivable
and analyzes  historical bad debts,  customer  concentrations,  customer  credit
worthiness,  current economic trends and changes in customer payment patterns to
evaluate  the  adequacy  of  these  reserves.  The  Company  had a net  accounts
receivable of $1,926,321,  after deducting  allowance of $3,907,  as of June 30,
2005.

Advances to Suppliers

The Company  advances  to certain  vendors for  purchase  of its  material.  The
advances to suppliers amounted to $1,239,039 at June 30, 2005.

Inventory

Inventory is mainly the raw material for  manufacturing  the  electrical  motor.
Inventory is valued at the lower of cost or market. The management  compares the
cost of inventory  with the market value and  allowance is made for writing down
the inventory to its market value, if lower.

Income Taxes

The Company utilizes SFAS No. 109, "Accounting for Income Taxes," which requires
the  recognition of deferred tax assets and  liabilities for the expected future
tax  consequences of events that have been included in the financial  statements
or tax returns. Under this method,  deferred income taxes are recognized for the
tax consequences in future years of differences  between the tax bases of assets

                                       7
<PAGE>
                     HARBIN ELECTRIC, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005
                                   (Unaudited)


and liabilities and their financial  reporting  amounts at each period end based
on enacted tax laws and statutory  tax rates  applicable to the periods in which
the differences are expected to affect taxable income.  Valuation allowances are
established,  when  necessary,  to reduce  deferred  tax  assets  to the  amount
expected to be realized.

According to the  Provisional  Regulations of the People's  Republic of China on
Income Tax,  the Document of  Reductions  and  Exemptions  of Income Tax for the
Company has been approved by the local tax bureau and the Management  Regulation
of Harbin Economic and Technological  Development Zone for the reporting period.
The Company is exempted from income tax from July 1, 2004 through June 30, 2006.

Fair Value of Financial Instruments

Statement of financial  accounting  standard  No. 107,  "Disclosures  about Fair
Value of Financial  Instruments,"  requires that the Company disclose  estimated
fair values of  financial  instruments.  The  carrying  amounts  reported in the
statements  of  financial  position for current  assets and current  liabilities
qualifying as financial instruments are a reasonable estimate of fair value.

Foreign Currency Transactions and Comprehensive Income (Loss)

Accounting principles generally require that recognized revenue, expenses, gains
and losses be included  in net  income.  Certain  statements,  however,  require
entities to report specific changes in assets and  liabilities,  such as gain or
loss on foreign  currency  translation,  as a separate  component  of the equity
section of the balance sheet. Such items,  along with net income, are components
of comprehensive  income. The functional  currency of the Company is the Chinese
Renminbi.  The unit of Renminbi is in Yuan.  Cumulative  translation  adjustment
amount and translation  adjustment gain were  insignificant at and for the three
month and six month periods ended June 30, 2005 and 2004.

Segment Reporting

Statement of Financial  Accounting  Standards No. 131 ("SFAS 131"),  "Disclosure
About  Segments of an Enterprise  and Related  Information"  requires use of the
"management approach" model for segment reporting. The management approach model
is based on the way a company's management organizes segments within the company
for making operating  decisions and assessing  performance.  Reportable segments
are based on products  and  services,  geography,  legal  structure,  management
structure, or any other manner in which management disaggregates a company.

SFAS 131 has no effect on the Company's  financial  statements as  substantially
all of the  Company's  operations  are  conducted in one industry  segment.  The
Company  consists  of one  reportable  business  segment.  All  revenue  is from
customers in People's Republic of China. All of the Company's assets are located
in People's Republic of China.

                                       8
<PAGE>
                     HARBIN ELECTRIC, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005
                                   (Unaudited)


Recent Pronouncements

On May 15, 2003, the Financial  Accounting  Standards Board ("FASB") issued FASB
Statement No. 150 ("SFAS 150"),  "Accounting for Certain  Financial  Instruments
with  Characteristics  of Both  Liabilities  and  Equity."  SFAS 150 changes the
accounting for certain  financial  instruments  that,  under previous  guidance,
could be  classified as equity or  "mezzanine"  equity,  by now requiring  those
instruments to be classified as liabilities (or assets in some circumstances) in
the  statement  of financial  position.  Further,  SFAS 150 requires  disclosure
regarding the terms of those instruments and settlement  alternatives.  SFAS 150
affects an entity's classification of the following freestanding instruments: a)
mandatory  redeemable  instruments  b) financial  instruments  to  repurchase an
entity's own equity instruments c) financial  instruments  embodying obligations
that the issuer must or could  choose to settle by issuing a variable  number of
its shares or other  equity  instruments  based  solely on (i) a fixed  monetary
amount known at inception or (ii) something other than changes in its own equity
instruments  d) SFAS 150 does not  apply to  features  embedded  in a  financial
instrument that is not a derivative in its entirety. The guidance in SFAS 150 is
generally effective for all financial instruments entered into or modified after
May 31, 2003,  and is otherwise  effective at the beginning of the first interim
period  beginning  after  June  15,  2003.  For  private  companies,   mandatory
redeemable  financial  instruments are subject to the provisions of SFAS 150 for
the fiscal period beginning after December 15, 2003. The Company does not expect
the adoption of SFAS No. 150 to have a material impact on its financial position
or results of operations or cash flows.

In December 2003, FASB issued a revised Interpretation No. 46, "Consolidation of
Variable  Interest  Entities" ("FIN 46R").  FIN 46R addresses  consolidation  by
business enterprises of variable interest entities and significantly changes the
consolidation   application  of  consolidation  policies  to  variable  interest
entities and, thus improves comparability between enterprises engaged in similar
activities  when  those  activities  are  conducted  through  variable  interest
entities. The Company does not hold any variable interest entities.

3.  PRINCIPLES OF CONSOLIDATION

The  accompanying  consolidated  financial  statements  include the  accounts of
Harbin  Electric,  Inc.  (from  the  merger  date)  and  its  100%  wholly-owned
subsidiary  Harbin  Tech Full  Electric  Co.,  Ltd.  ("HTFE").  All  significant
inter-company  accounts and transactions  have been eliminated in consolidation.
The  historical  results  for the first six month  period  ended  June 30,  2005
include both the Company and HTFE while the historical results for the six month
period ended June 30, 2004 include only HTFE.

4.  MAJOR CUSTOMERS AND VENDORS

Two  major  customers  accounted  for 81% of the net  revenue  for the six month
period ended June 30, 2005. At June 30, 2005, the total  receivable  balance due

                                       9
<PAGE>
                     HARBIN ELECTRIC, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005
                                   (Unaudited)


from these two customers was $1,303,170 and $594,171,  respectively. The Company
did not have revenue for the six month period ended June 30, 2004.

Three  vendors  provided 84% of the  Company's  raw  materials for the six month
period ended June 30, 2005. The Company's  accounts payable to these vendors was
$1,815 at June 30, 2005. The Company did not have any  significant  purchases in
the six month period ended June 30, 2004.

The Company extends credit to its customers based upon its assessment of their
credit worthiness and generally does not require collateral. Credit losses have
not been significant.

5. INVESTMENT IN MARKETABLE EQUITY SECURITIES

The Company's  investments in marketable securities are classified as "available
for sale" securities, and are carried on the financial statements at fair market
value.  Realized gains and losses are included in earnings,  unrealized  holding
gains and losses are reported as a separate component of stockholders' equity as
a component of "Other Comprehensive  Income." The average cost method is used to
determine cost of securities.

The  following is a summary of the Company's  investment  in  marketable  equity
securities, all of which are classified as available-for-sale  securities, as of
June 30, 2005. The Company had no marketable securities at June 30, 2004.

---------------------- --------------- ---------------------- ------------------
                           Cost        Estimated fair value    Unrealized loss
---------------------- --------------- ---------------------- ------------------
Equity securities        $508,245            $362,600              $145,645
---------------------- --------------- ---------------------- ------------------

6. INTANGIBLE ASSETS

Intangible  assets consist of Patents.  The Company is amortizing the intangible
assets  over  3  year  period.  The  Company  evaluates  intangible  assets  for
impairment,  at least on an annual  basis and  whenever  events  or  changes  in
circumstances  indicate that the carrying value may not be recoverable  from its
estimated  future  cash  flows.   Recoverability  of  intangible  assets,  other
long-lived assets and, goodwill is measured by comparing their net book value to
the related projected  undiscounted cash flows from these assets,  considering a
number  of  factors  including  past  operating   results,   budgets,   economic
projections, market trends and product development cycles. If the net book value
of the  asset  exceeds  the  related  undiscounted  cash  flows,  the  asset  is
considered  impaired,  and a second test is  performed  to measure the amount of
impairment  loss.  Potential  impairment  of  goodwill  is  being  evaluated  in
accordance with SFAS No. 142.

Net intangible assets at June 30, 2005 were as follows:

                                       10
<PAGE>
                     HARBIN ELECTRIC, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005
                                   (Unaudited)

Net intangible assets at June 30, 2005 were as follows:


                                                            $      598,152
            Patents
            Less Accumulated amortization                          (18,957)

                                                            ---------------
                                                            $      579,195
                                                            ===============

Amortization  expense for the quarter  ended June 30, 2005  amounted to $29,816.
The Company did not have amortization of intangible assets at June 30, 2004.

Amortization  expense for the Company's  current  amortizable  intangible assets
over the next  five  fiscal  years is  estimated  to be:  2006:  $40,333;  2007:
$40,333; 2008: $40,333; 2009: $40,333; and, 2010: $40,333.

7.   SHAREHOLDER'S EQUITY

On January 12, 2005, TFI and its  shareholders  entered into a merger  agreement
("Merger Agreement") with Torch Executive Services,  Inc. ("Torch") and a wholly
owned subsidiary of Torch, Torch Subsidiary,  Inc. ("TSI"). At the closing which
occurred on January 24, 2005,  TFI was merged with and into TSI and the separate
existence of TFI ceased. On the date of the merger,  there were 7,000,300 shares
of  common  stock  of  Torch  outstanding.  As a part of the  merger,  8,000,000
restricted shares of Torch were issued to the shareholders of TFI and the former
president,  sole director and majority  shareholder of Torch returned  5,000,000
shares of Torch to the  treasury  which was  subsequently  cancelled.  After the
merger, there were 10,000,300 shares of stock of Torch outstanding.

On January 24, 2005 Torch  declared a stock  dividend of one-half  share on each
share of its stock  outstanding to all  stockholders of record as of January 26,
2005,  after the Merger.  The stock  dividend  was payable on January 27,  2005.
After the stock  dividend,  the Company had  15,000,450  shares of common  stock
outstanding.  The  Company  has a total of  15,000,450  shares of  common  stock
outstanding as of June 30, 2005.

On January 12, 2005 HTFE  entered into an  agreement  with related  party Harbin
Tech Full Industry Co., Ltd. ("HTFI"), pursuant to which HTFI agreed to transfer
all of its interests in joint venture with Baldor Electric  Company (Note 14) to
HTFE in exchange for the Company to issue  1,000,000  shares of its common stock
to HTFI. The Company agreed to the issuance of such shares on February 16, 2005.

Based upon the valuation of the Joint Venture by an independent  appraiser,  the
Company  determined  that the number of shares  issued under the Share  Transfer
Agreement should have been 786,885.  In light of such valuation,  HTFI, HTFE and
the  Company  agreed to amend and restate the Share  Transfer  Agreement  and to
adjust the number of shares the Company  would issue to HTFI.  On May 12,  2005,
the Company entered into a certain Amended and Restated  Agreement with HTFI and
HTFE, to amend the Share Transfer  Agreement  dated as of January 12, 2005. Upon
completion of the accounting for inclusion of the Joint Venture,  HTFI, HTFE and
the Company  agreed that the Company  would issue  786,885  shares of its common
stock, par value $0.00001 to HTFI.

                                       11
<PAGE>
                     HARBIN ELECTRIC, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005
                                   (Unaudited)

As of June 30, 2005 such shares have not been issued.

8.   SUPPLEMENTAL DISCLOSURE OF CASH FLOWS

The Company  prepares its statements of cash flows using the indirect  method as
defined under the Financial Accounting Standard No. 95.

The Company  paid $0 for  interest  and income tax during the six month  periods
ended June 30, 2005 and 2004.

9.   STATUTORY COMMON WELFARE FUND

As stipulated by the Company Law of the People's Republic of China ("PRC"),  net
income after taxation can only be distributed as dividends  after  appropriation
has been made for the following:

          (i)  Making up cumulative prior years' losses, if any;

          (ii) Allocations to the "Statutory surplus reserve" of at least 10% of
               income after tax, as determined  under PRC  accounting  rules and
               regulations,  until  the  fund  amounts  to 50% of the  Company's
               registered capital;

          (iii) Allocations  of 5-10% of income after tax, as  determined  under
               PRC accounting rules and regulations, to the Company's "Statutory
               common  welfare fund",  which is  established  for the purpose of
               providing  employee  facilities and other collective  benefits to
               the Company's employees; and

          (iv) Allocations to the discretionary  surplus reserve, if approved in
               the shareholders' general meeting.

The  Company  established  a reserve  for the annual  contribution  of 5% of net
income to the welfare fund. The amount included in the statutory reserve for the
six month period ended June 30, 2005 amounted to $327,283.

10.  STATUTORY RESERVE

In accordance  with the Chinese  Company Law (Note 9), the Company has allocated
10% of its annual net income,  amounting to $664,483,  as statutory  reserve for
the six month period ended June 30, 2005.

11.  EMPLOYEE PENSION

                                       12
<PAGE>
                     HARBIN ELECTRIC, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005
                                   (Unaudited)


The employee  pension in Harbin  generally  includes  two parts:  (a) 20% of the
employee's actual salary in the prior year, to be paid by the Company; provided,
that,  if the average  salary falls below $1,165 for each  employee,  $1,165 per
employee will be used as the basis;  and (b) 8% of the employee's  actual salary
in the prior  year,  to be paid by the  employee,  subject  to the same  minimum
requirement. The Company made no contributions of employment benefits, including
pension in the six month  periods  ended June 30,  2004 and June 30,  2005.  The
Company agreed with the local  authorities to commence  these  contributions  in
2005.

12.  EARNINGS PER SHARE

Earnings per share for six month  periods  ended June 30, 2005 and June 30, 2004
were  determined by dividing net income for the periods by the weighted  average
number  of both  basic and  diluted  shares of  common  stock and  common  stock
equivalents outstanding.

13.  MERGER AGREEMENT

On January  12,  2004,  Torch  Executive  Services  Ltd.,  a Nevada  corporation
("Torch"),  entered into an Agreement  and Plan of Merger  ("Merger  Agreement")
with Torch  Subsidiary,  Inc., a Delaware  corporation  ("TSI")  wholly-owned by
Torch, Tech Full  International,  Inc., a Delaware  corporation  ("TFI") and the
shareholders  of TFI.  TFI had  one  100%  wholly-owned  subsidiary  in  Nangang
District, Harbin of Heilongjiang Province, China, Harbin Tech Full Electric Co.,
Ltd.  ("HTFE").  Under the terms of the agreement,  TFI merged with and into TSI
and Torch issued  8,000,000  million  shares of its common  stock  ("Acquisition
Shares") to the holders of TFI and, in  consideration  of the payment of $5,000,
the former president of Torch returned  5,000,000 million shares of common stock
to the treasury which was  subsequently  cancelled.  The new shares  constituted
approximately 80 percent of the outstanding  shares of Torch,  after the merger.
The Merger Agreement was closed on January 24, 2004.

At  closing,  Frank  Torchia  was  replaced as  president,  principal  executive
officer,  treasurer,  principal accounting officer, principal financial officer,
and secretary and the officers of TFI have been  appointed as officers of Torch.
Further,  at the closing of the transaction,  the existing president resigned as
Torch's sole  director  and officers of TFI have been  appointed to the board of
directors of Torch.

At the effective date of merger,  by virtue of the merger and without any action
on the part of TSI, TFI or the TFI shareholders,  the shares of capital stock of
each of TFI and TSI were converted as follows:

a) Capital  Stock of TSI:  Each issued and  outstanding  share of TSI's  capital
stock continued to be issued and outstanding and was converted into one share of
validly  issued,  fully  paid,  and  non-assessable  common  stock of TSI, as it
existed  from and after  closing.  Each stock  certificate  of TSI's  evidencing
ownership of any such shares shall continue to evidence ownership of such shares
of capital stock of the TSI, as it existed from and after closing.

                                       13
<PAGE>
                     HARBIN ELECTRIC, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005
                                   (Unaudited)

b) Conversion of TFI. Each share issued and  outstanding  of TFI that was issued
and outstanding at the effective date of the merger was automatically  cancelled
and  extinguished  and  converted,  without any action on the part of the holder
thereof,  into the right to receive at the time and in the amounts  described in
the Merger  Agreement  an amount of  Acquisition  Shares  equal to the number of
Acquisition Shares divided by the number of TFI shares  outstanding  immediately
prior to  closing.  All such  TFI  shares,  when so  converted,  were no  longer
outstanding  and were  automatically  cancelled and retired and ceased to exist,
and each holder of a certificate representing any such shares ceased to have any
rights with respect thereto,  except the right to receive the Acquisition Shares
paid in  consideration  therefore  upon the  surrender  of such  certificate  in
accordance with the merger agreement.

On January 26,  2005,  Torch  changed  its name to Harbin  Electric,  Inc.  (the
"Company") and TSI merged with and into the Company, with Harbin Electric,  Inc.
remaining as the surviving corporation. On January 26, 2005 the Company declared
a stock dividend of one-half share on each share of its stock outstanding to all
stockholders of record as of January 26, 2005, after the merger  agreement.  The
stock dividend was payable on January 27, 2005.

14.  JOINT VENTURE WITH BALDOR ELECTRIC COMPANY

On January 12, 2005, Harbin Tech Full Electric Co., Ltd. ("HTFE") entered into a
certain Share Transfer  Agreement (the "Share Transfer  Agreement")  with Harbin
Tech Full Industry Co., Ltd. ("HTFI"), pursuant to which HTFI agreed to transfer
all of its  interests  in a joint  venture  (the  "Joint  Venture")  with Baldor
Electric Company  ("Baldor"),  a U.S. company which trades on the New York Stock
Exchange, to HTFE.

Pursuant to a certain Joint Venture Agreement (the "Joint Venture Agreement") by
and  between  HTFI and  Baldor,  HTFI has a 65%  equity  ownership  in the Joint
Venture and Baldor has the  remaining  35%.  Also  pursuant to the Joint Venture
Agreement,  HTFI will receive 55% of the profits from the Joint Venture with the
remainder of the profits going to Baldor. The purpose of the Joint Venture is to
manufacture  and market  electric  machineries  and related  equipment in China,
utilizing Baldor's technology.

In exchange for the transfer of the interests in the Joint Venture,  HTFE agreed
to cause its publicly traded holding company to issue 1,000,000 shares of Harbin
Electric, Inc.'s common stock to HTFI as a payment for the transfer of the Joint
Venture  interests.  Based  upon  the  valuation  of  the  Joint  Venture  by an
independent  appraiser,  the Company determined that the number of shares issued
under the Share Transfer  Agreement  should have been 786,885.  In light of such
valuation,  HTFI,  HTFE and the  Company  agreed to amend and  restate the Share
Transfer Agreement and to adjust the number of shares the Company would issue to
HTFI. On May 12, 2005, the Company  entered into a certain  Amended and Restated
Agreement  (the "Amended and Restated  Agreement")  with HTFI and HTFE, to amend
the Share Transfer  Agreement  dated as of January 12, 2005.  Upon completion of
the accounting for inclusion of the Joint  Venture,  HTFI,  HTFE and the Company
agreed that the Company  would issue  786,885  shares of its common  stock,  par
value $0.00001 to HTFI.

                                       14
<PAGE>
                     HARBIN ELECTRIC, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005
                                   (Unaudited)

As of June 30, 2005, the Joint Venture has not  manufactured  any products.  The
Joint Venture is in the discussion for further business development.

15.  RELATED PARTY TRANSACTION

On January 12, 2005,  HTFE entered into a Share  Exchange  Agreement  with HTFI,
pursuant  to which  HTFI  agreed to  transfer  all of its  interests  in a joint
venture with Baldor Electric Company ("Baldor"),  a U.S. company which trades on
the New York Stock Exchange,  to HTFE (Note 14). In exchange for the transfer of
the  interests in the joint  venture,  HTFE agreed to cause its publicly  traded
holding company to issue 1,000,000  shares of its common stock,  common stock to
HTFI as a payment for the transfer of the joint venture interests. The number of
shares to be issued to HTFI was later reduced to 786,885, based on an evaluation
by an independent  appraiser.  The parties  entered into an Amended and Restated
Agreement,  dated as of May 12, 2005 to record such reduction.  Tianfu Yang, the
Chief Executive  Officer and Chairman of the Company and the Company's  majority
shareholder, is also the principal owner of HTFI.

16.  RECLASSIFICATIONS

Certain  prior period  amounts have been  reclassified  to conform to the period
ended June 30, 2005 presentation.

17.  RESTATEMENT

The Company has  restated  its  statement of cash flows for the six months ended
June 30,  2005 to reflect  corrected  balance for cash at  beginning  of period,
accounts receivable,  inventory,  advances to suppliers,  other assets, accounts
payable, other payable, accrued expenses,  non-cash acquisition of fixed assets,
due to related parties and advances from/to related parties.

The effect of the correction is as follows:

                                            As previously         As restated
                                               reported

Net cash  provided  by  operating           $    2,948,484       $  1,727,414
activities

Net  cash   used  in   investing                (2,030,081)          (477,088)
activities

Net cash  provided  by  financing                  222,386            293,669
activities

Net  increase  in  cash  and  cash               1,140,789          1,543,995
equivalents

Cash   and   cash   equivalents,                 2,614,009          2,210,803
beginning of period

Cash and cash equivalents,  end of          $    3,754,798       $  3,754,798
period

                                       15
<PAGE>

                     HARBIN ELECTRIC, INC. AND SUBSIDIARIES
            Management's Discussion and Analysis or Plan of Operation

Item 2.  Management's Discussion and Analysis or Plan of Operation

INFORMATION REGARDING FORWARD LOOKING STATEMENTS

The  following  discussion  should  be read in  conjunction  with the  unaudited
condensed  consolidated financial statements and notes thereto set forth in Item
1 of  this  Quarterly  Report.  In  addition  to  historical  information,  this
discussion  and  analysis  contains  forward-looking  statements  that relate to
future  events  and  expectations  and,  as  such,  constitute   forward-looking
statements.  Forward-looking  statements  include those containing such words as
"anticipates," "believes," "estimates," "expects," "hopes," "targets," "should,"
"will,"  "will likely  result,"  "forecast,"  "outlook,"  "projects"  or similar
expressions.  Such  forward-looking  statements involve known and unknown risks,
uncertainties  and other factors that may cause actual  results,  performance or
achievements  of the Company to be materially  different from those expressed or
implied in the forward-looking statements.

Overview

We are incorporated  under the laws of the state of Nevada and are headquartered
in Harbin,  China.  We  manufacture,  research,  sell and service  linear motors
systems (LIMs) for the domestic and overseas  markets.  LIMs in concept  perform
similar  functions  to  rotary  motors,  but  differ  because  LIMs  are flat in
structure  and can be  configured  into a number  of  forms.  LIMs  also use the
principles  of magnetic  properties  to induce linear forces that range in power
suitable for many types of applications. We have domestic patents for commercial
applications  of LIMs.  Our  LIMs  represent  an  improvement  over  traditional
electric motors based on design,  energy output, energy efficiency and precision
movement.  Our products have applications in numerous industries,  including the
oil, postal, transportation, logistical and packaging industries.

Significant Accounting Policies

Use of Estimates
----------------

The preparation of financial  statements in conformity  with generally  accepted
accounting  principles requires us to make estimates and assumptions that affect
the reported  amounts of assets and  liabilities  and  disclosure  of contingent
assets and liabilities at the date of the financial  statements and the reported
amounts of revenues and expenses  during the reporting  period.  Actual  results
could differ from those estimates.

Accounts Receivable
-------------------

We maintain  reserves for  potential  credit losses on accounts  receivable.  We
review the composition of accounts  receivable and analyze historical bad debts,
customer concentrations, customer credit worthiness, current economic trends and
changes in customer payment patterns to evaluate the adequacy of these reserves.
Reserves are recorded primarily on a specific identification basis.

Inventories
-----------

                                       16
<PAGE>
                     HARBIN ELECTRIC, INC. AND SUBSIDIARIES
            Management's Discussion and Analysis or Plan of Operation

Inventories  are valued at the lower of cost  (determined on a weighted  average
basis) or market.  We compare the cost of inventories  with the market value and
allowance is made for writing down the  inventories  to their market  value,  if
lower.

Property & Equipment
--------------------

Property and  equipment are stated at cost.  Expenditures  for  maintenance  and
repairs are charged to earnings as incurred; additions, renewals and betterments
are capitalized.  When property and equipment are retired or otherwise  disposed
of,  the  related  cost  and  accumulated  depreciation  are  removed  from  the
respective   accounts,   and  any  gain  or  loss  is  included  in  operations.
Depreciation  of property  and  equipment  is provided  using the  straight-line
method  for  substantially  all  assets  with  estimated  lives of: 30 years for
building,  10 years for machinery,  5 years for office equipment and 8 years for
vehicles.

Intangible Assets
-----------------

Intangible  assets  consist  of  patents.  We  evaluate  intangible  assets  for
impairment,  at least on an annual  basis and  whenever  events  or  changes  in
circumstances  indicate that the carrying value may not be recoverable  from its
estimated  future  cash  flows.   Recoverability  of  intangible  assets,  other
long-lived assets and, goodwill is measured by comparing their net book value to
the related projected  undiscounted cash flows from these assets,  considering a
number  of  factors  including  past  operating   results,   budgets,   economic
projections, market trends and product development cycles. If the net book value
of the  asset  exceeds  the  related  undiscounted  cash  flows,  the  asset  is
considered  impaired,  and a second test is  performed  to measure the amount of
impairment  loss.  Potential  impairment of goodwill after July 1, 2002 is being
evaluated in accordance with SFAS No. 142.

Revenue Recognition
--------------------

Our  revenue  recognition  policies  are in  compliance  with  Staff  Accounting
Bulletin  (SAB) 101.  Sales  revenue is  recognized  at the date of  shipment to
customers when a formal arrangement  exists, the price is fixed or determinable,
the delivery is  completed,  no other  significant  obligations  by us exist and
collectibility  is  reasonably  assured.  Payments  received  before  all of the
relevant criteria for revenue recognition are satisfied are recorded as unearned
revenue.

Stock-based Compensation
------------------------

In October  1995,  the FASB  issued SFAS No. 123,  "Accounting  for  Stock-Based
Compensation."  SFAS No. 123 prescribes  accounting and reporting  standards for
all stock-based compensation plans, including employee stock options, restricted
stock, employee stock purchase plans and stock appreciation rights. SFAS No. 123
requires compensation expense to be recorded (i) using the new fair value method
or (ii) using the existing accounting rules prescribed by Accounting  Principles
Board Opinion No. 25,  "Accounting  for Stock Issued to Employees"  (APB 25) and
related  interpretations  with  pro  forma  disclosure  of what net  income  and
earnings per share would have been had we adopted the new fair value method.  We
use the  intrinsic  value  method  prescribed  by APB 25 and have  opted for the
disclosure provisions of SFAS No. 123.

                                       17
<PAGE>
                     HARBIN ELECTRIC, INC. AND SUBSIDIARIES
            Management's Discussion and Analysis or Plan of Operation

On January  31,  2005,  the  Company  granted a total of 150,000  stock  options
("Options")  to  purchase   shares  of  its  common  stock  to  three  directors
("Optionees")  of the  Company  under the  Company's  2005  Stock  Option  Plan,
pursuant to a written agreement (the "Award  Agreement").  The Options terminate
five (5) years from the date of the grant. Pursuant to the Award Agreement,  the
Options shall become  exercisable  during the term that the Optionee serves as a
Director of the Company,  as follows:  (i) 50% of the shares of stock subject to
this  Option  became  exercisable  immediately  as of  the  date  of  the  Award
Agreement;  and (ii) the  balance of the shares of stock  subject to this Option
shall become  exercisable in eight (8) equal  quarterly  installments,  of 3,125
shares per installment,  the first  installment to be exercisable as of the last
day of the first quarter of calendar year 2005, with an additional 3,125 of such
Shares becoming  exercisable as of the last day of each subsequent quarter.  The
Company  granted the  Optionees  the right to  purchase  the number of shares of
stock set forth in the Award Agreement,  for cash (or other  consideration as is
authorized  under  the Plan and  acceptable  to the  Board of  Directors  of the
Company,  in their  sole  and  absolute  discretion)  at $3.10  per  share  (the
"Exercise  Price"),  such  Exercise  Price being the high price per share of the
Company's  common stock  reported on the NASD  Over-The-Counter  Bulletin  Board
under HRBN.OB on January 31, 2005.

Income Taxes
------------

We utilize  SFAS No. 109,  "Accounting  for Income  Taxes,"  which  requires the
recognition of deferred tax assets and  liabilities  for the expected future tax
consequences  of events that have been included in the  financial  statements or
tax returns. Under this method, deferred income taxes are recognized for the tax
consequences in future years of differences  between the tax bases of assets and
liabilities  and their financial  reporting  amounts at each period end based on
enacted tax laws and statutory tax rates  applicable to the periods in which the
differences  are expected to affect  taxable  income.  Valuation  allowances are
established,  when  necessary,  to reduce  deferred  tax  assets  to the  amount
expected to be realized.

According to the  Provisional  Regulations of the People's  Republic of China on
Income Tax, the Document of Reductions  and Exemptions of Income Tax for us have
been  approved by the local tax bureau and the  Management  Regulation of Harbin
Economic and  Technological  Development  Zone.  We are exempted from income tax
from July 1, 2004 through June 30, 2006.

Foreign Currency Transactions and Comprehensive Income (Loss)
-------------------------------------------------------------

Accounting principles generally require that recognized revenue, expenses, gains
and losses be included  in net  income.  Certain  statements,  however,  require
entities to report specific changes in assets and  liabilities,  such as gain or
loss on foreign  currency  translation,  as a separate  component  of the equity
section of the balance sheet. Such items,  along with net income, are components
of comprehensive income. Our transactions occur in Chinese Renminbi. The unit of
Renminbi is in Yuan.

Recent Accounting Pronouncements

On May 15 2003, the FASB issued FASB Statement No. 150 ("SFAS 150"), "Accounting
for Certain Financial  Instruments with  Characteristics of both Liabilities and
Equity." SFAS 150 changes the accounting for certain financial instruments that,
under previous guidance, could be classified as equity or "mezzanine" equity, by
now requiring  those  instruments to be classified as liabilities  (or assets in
some  circumstances) in the statement of financial position.  Further,  SFAS 150

                                       18
<PAGE>
                     HARBIN ELECTRIC, INC. AND SUBSIDIARIES
            Management's Discussion and Analysis or Plan of Operation

requires  disclosure  regarding the terms of those  instruments  and  settlement
alternatives.  SFAS 150  affects an  entity's  classification  of the  following
freestanding  instruments:  (a) Mandatory  redeemable  instruments (b) Financial
instruments  to  repurchase  an entity's own equity  instruments  (c)  Financial
instruments embodying obligations that the issuer must or could choose to settle
by issuing a variable  number of its shares or other  equity  instruments  based
solely on (i) a fixed monetary amount known at inception or (ii) something other
than  changes in its own equity  instruments  and (d) SFAS 150 does not apply to
features  embedded in a financial  instrument  that is not a  derivative  in its
entirety.  The guidance in SFAS 150 is  generally  effective  for all  financial
instruments  entered  into or  modified  after May 31,  2003,  and is  otherwise
effective at the beginning of the first interim period  beginning after June 15,
2003. For private  companies,  mandatory  redeemable  financial  instruments are
subject to the  provisions  of SFAS 150 for the fiscal  period  beginning  after
December 15,  2003.  The Company does not expect the adoption of SFAS No. 150 to
have a material  impact on its  financial  position or results of  operations or
cash flows.

In December  2003,  the  Financial  Accounting  Standards  Board (FASB) issued a
revised  Interpretation  No. 46,  "Consolidation of Variable Interest  Entities"
(FIN 46R). FIN 46R addresses  consolidation by business  enterprises of variable
interest  entities and significantly  changes the  consolidation  application of
consolidation   policies  to  variable  interest  entities  and,  thus  improves
comparability  between  enterprises  engaged  in similar  activities  when those
activities are conducted  through variable interest  entities.  The Company does
not hold any variable interest entities.

Six Months  Ended June 30,  2005  Compared  To Six  Months  Ended June 30,  2004
Revenue

For the six month  period  ended June 30,  2005,  we  generated  net revenues of
$9,402,739.  During the six month period ended June 30, 2004, we did not produce
operating revenue,  as the initial production launch occurred in the end of June
2004.

Gross Profit
------------

The Company  achieved a gross profit of $4,804,659 for the six months ended June
30, 2005. We had no gross profit,  because we had no revenues for the six months
ended June 30, 2004,  as the initial  production  launch  occurred in the end of
June 2004. Gross margin, as a percentage of revenues, was 51% for the six months
ended June 30, 2005.

Operating Expenses
------------------

The Company  incurred  operating  expenses of $518,334  for the six months ended
June 30,  2005,  an increase of $477,022  compared to $41,312 for the six months
ended June 31, 2004.  This increase is a direct result of full  operation of the
Company  during the first half year of 2005 and no revenue during the six months
ended June 30,  2004.  Aggregated  selling  expenses  of  $124,333  account  for
expenses  related to costs  associated with sales and marketing of the Company's
products.  Operating  expenses  include general and  administrative  expenses of
$394,001 for the first-half  year 2005 and relate to the cost of maintaining the
company's facilities, salaries and research and development.

                                       19
<PAGE>
                     HARBIN ELECTRIC, INC. AND SUBSIDIARIES
            Management's Discussion and Analysis or Plan of Operation

Net Income
----------

The Company's net income was  $4,300,443 for the six months ended June 30, 2005,
compared  to a loss of $41,312  for the six  months  ended  June 30,  2004.  The
increase is attributed to the initial production launch in the end of June 2004.

Liquidity and Capital Resources
-------------------------------

As of June 30, 2005 the Company had $3,754,798 cash and cash equivalents, and we
believe that current cash needs can be met from working capital. The Company had
net cash flows  provided by operations  of  $1,727,414  for the six month period
ended June 30, 2005, as compared to net cash used in operations of $4,014,175 in
the corresponding period last year. The change in net cash flows from operations
in the  current  period as compared  to the  corresponding  period last year was
mainly due to the initiation of full operations in the end of June 2004.

Cash flows from  investing  activities  resulted in net usage of $477,088 in the
current period as compared $155,666 in the  corresponding  period last year. The
usage in the  current  period  was  mainly due to  investments  in  patents  and
technology  in the amount of $266,200,  and property and equipment of $1,763,881
in the six month period ended June 30, 2005.

The Company had a net increase in cash and cash  equivalent of $1,543,995 in the
current period as compared to a net increase of $1,499,519 in the  corresponding
period last year.

The majority of the Company's  revenues and expenses were denominated  primarily
in Renminbi ("RMB"), the currency of the People's Republic of China. There is no
assurance  that exchange  rates between the RMB and the U.S.  dollar will remain
stable.  A revaluation  of the RMB relative to the U.S.  dollar could  adversely
affect our business,  financial  condition and results of operations.  We do not
engage in currency hedging, therefore inflation has not had a material impact on
our business.


                                       20
<PAGE>
Item 3.  Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures.
-----------------------------------------------------

The Company's Chief Executive  Officer and Chief Financial  Officer conducted an
evaluation  of the  effectiveness  of the design and  operation of the Company's
disclosure controls and procedures as defined in Securities Exchange Act of 1934
Rule  13a-15(e),  as of the end of the period  covered by this report.  Based on
that  evaluation,  the  Chief  Executive  Officer  and Chief  Financial  Officer
concluded that the Company's  disclosure  controls and procedures were effective
as of the end of the period covered by this report.

(b) Changes in Internal Control over Financial Reporting.
---------------------------------------------------------

There were no significant  changes in internal controls over financial reporting
that occurred during the first quarter of 2005 that have materially affected, or
are reasonably likely to materially  affect, the Company's internal control over
financial reporting.



                           PART II. OTHER INFORMATION

Item 6.  Exhibits.

                    31.1      Certification  by  the  Chief  Executive   Officer
                              pursuant to Rule 13a-14(a) or 15d-14(a)

                    31.2      Certification  by  the  Chief  Financial   Officer
                              pursuant to Rule 13a-14(a) or 15d-14(a)

                    32.1      Certification  of the Chief Executive  Officer and
                              the Chief  Financial  Officer  pursuant  18 U.S.C.
                              Section 1350,  as adopted  pursuant to Section 906
                              of the Sarbanes-Oxley Act of 2002


                                       21
<PAGE>
                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.

                                             Harbin Electric, Inc.




Date:  November 18, 2005                      /s/ Tianfu Yang
                                             -----------------------
                                             Tianfu Yang
                                             Chief Executive Officer



Date:  November 18, 2005                      /s/ Zedong Xu
                                             -----------------------
                                             Zedong Xu
                                             Chief Financial Officer



                                       22
<PAGE>
                                  EXHIBIT INDEX
(a) Exhibits:
<TABLE>
<CAPTION>

Exhibit       Description                                            Method of Filing
Number

<C>                             <C>                                             <C>
31.1         Certification  by  the  Chief  Executive   Officer      Filed herewith as Exhibit 31.1
             pursuant to Rule 13a-14(a) or 15d-14(a)

31.2         Certification  by  the  Chief  Financial   Officer      Filed herewith as Exhibit 31.2
             pursuant to Rule 13a-14(a) or 15d-14(a)

32.1         Certification  of the Chief Executive  Officer and      Filed herewith as Exhibit 32.1
             the Chief  Financial  Officer  pursuant  18 U.S.C.
             Section 1350,  as adopted  pursuant to Section 906
             of the Sarbanes-Oxley Act of 2002
</TABLE>

(b) Reports on Form 8-K during the quarter ended June 30, 2005:

     (i)      Form 8-K  filed on July 7, 2005  disclosing  an  amendment  to the
Company's Bylaws.

     (ii)       Form 8-K  filed  on May 12,  2005  disclosing  the  Amended  and
Restated Share Transfer  Agreement as well as the issuance of the 786,885 shares
from the Company to Harbin Tech Full Industry Co., Ltd.

     (iii)       Form 8-K  filed on May 12,  2005  disclosing  the  issuance  of
non-statutory stock options.



                                       23